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Asia

India's currency purge leaves millions broke

Public anger has been rising as Indian banks struggle to dispense cash after the government withdrew large-denomination bills. Nearly half of India's 202,000 ATMs were shut and those that worked quickly ran out of cash.

Hundreds of thousands stood outside banks for a third day for long hours Saturday trying to replace 500 (6.80 euros, $7.40) and 1,000 rupee bills that will soon be worthless.

The government stunned the country on Tuesday when Prime Minister Narendra Modi announced in a televised address that the high-denomination bills would be withdrawn as part of a blitz on "black money" and fake notes.

The government has tried to reassure citizens that only tax evaders will suffer. But as these bills made up more than 80 percent of the currency in circulation, millions have been left without cash and large parts of the cash-driven economy have ground to a halt. Much of India's rural economy is powered by cash transactions, with few people having bank accounts or operating one even if they do.

Some are angry at the prime minister - currently on an official visit to Japan - for leaving the country during the turmoil. "He is taking bullet-train rides in Japan and here you have old people knocking on bank doors for cash," Prabhat Kumar, a college student who said he had spent six hours waiting in line, told the Reuters news agency. "He has made a terrible mistake."

"There is chaos everywhere," said Delhi Chief Minister Arvind Kejrilwal and a political rival of the prime minister. He said Modi's move had upended the lives of the poor and working class while the rich - whose wealth he had sought to target - had found loopholes to get around the new rules.

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India scraps 500 and 1000 rupee notes

In the capital city, crowds argued and banged on the glass doors of bank branches as security guards tried to keep the angry throngs of people at bay. Traders in Delhi's vegetable market said they were considering shutting down the market as cash was running out and banks were dispensing only a limited amount. "We might have to close down until the situation stabilizes," said Metharam Kriplani, the president of the Chambers of Azadpur Fruit and Vegetable Traders.

In India's wealthiest city, Mumbai, people said grocers were charging 10 times the price of salt in return for accepting the old cash notes, and in the southeastern city of Bengaluru, some people were using their old notes to buy one-time insurance policies.

Indien Ansturm auf Bank Umtausch von Rupien Scheinen (picture-alliance/AP Photo/S. Das)

Queues have formed at banks across India

The government has asked people to redeem the old 500 and 1,000 rupees notes by December 30. The central bank said there was enough cash available with banks and that it had made arrangements to deliver the new banknotes to branches across the country.

Government attempt to crack down on black economy

Modi's move was aimed at shrinking the "black economy," the term widely used to describe transactions that take place outside formal channels and which could be as high as 20 percent of gross domestic product, according to investment firm Ambit.

Already many are skeptical that the plan will do much good.

"Will it put an end to black money? Hardly. People with large amounts of black money will convert it into gold and foreign currency," the newspaper "Economic Times" said in an editorial earlier this week.

 jar/tj (Reuters, AFP)

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